Cap and Trade in Ontario - Avoiding the EU's Pitfalls

 P. Jason Kroft and Sam Dukesz - 

The European Union Emission Trading System (EU ETS) is the world’s largest cap and trade system, covering all countries in the European Union. It is also one of the world’s most troubled, as it has largely failed to live up the expectations of emissions reductions that it was initially touted to bring about. This blog post analyzes the impediments to the success of EU ETS, and then provides a forward-looking analysis of the applicability of those impediments to the proposed Ontario cap and trade program. 

A Snapshot of the EU ETS: Program Design and Implementation Problems

The EU ETS was initially implemented in phases, with a pilot Phase I from 2005-2007, followed by a Kyoto Phase II from 2008-2012 and a number of subsequent phases. The initial system covered approximately half of EU CO2 emissions across 31 EU countries. The system was limited to certain sectors, as many sectors, such as transportation, were exempted because of concerns about competitiveness with non-participating jurisdictions. 

Continue Reading...

Cap in Hand - Are you ready for the Ontario Cap and Trade Regime?

P. Jason Kroft and Luke Sinclair - 

The Ontario government has introduced a carbon cap and trade regime expected to go live in January 2017. The cap and trade program will have real impacts for consumers and business. Click here to see a high level summary of the program with initial estimates of the costs. We are also available for consultation if you want to see how this program may impact your own business. We will continue to monitor the development of the program with practical insights for business.

Examining California, Quebec and Ontario's cap-and-trade systems

 Jason Kroft and Luke Sinclair

In this post we will more closely examine the details of Ontario’s recently announced draft cap-and-trade system in combination with its counterparts in California and Quebec. You will recall that last year we suggested that Ontario's system would follow closely in the footsteps of the existing cap-and-trade systems found within California and Quebec. The link to the May 2015 piece can be found here.

As a result of Ontario’s desire to join the Western Climate Initiative (WCI) and the benefits of a harmonized approach to the salient details of a cap-and-trade system that Ontario would introduce with the programs in Quebec and California, we suggested that any proposed cap-and-trade system must follow the detailed policy architecture of the WCI and accordingly, would mimic to a large extent the content, scope and design of the systems within Quebec and California. We further hypothesized that, based on existing public disclosure, the Ontario government had already effectively committed to joining the WCI and the recently released details of the proposed Ontario system have confirmed our predictions to be accurate. 

Continue Reading...

Europe rejects higher carbon prices

Monique Alicandri -

The media reported yesterday that the European Parliament has rejected an attempt to raise the costs of emitting greenhouse gases in a contentious 334-315 vote. Siding with opponents of increased energy costs, Members voted down a measure that would have temporarily cut a large surplus of carbon allowances currently being traded. The BBC reports that the price of carbon on the EU Emissions Trading Scheme has since plunged to less than 5 euros a tonne.

Given that energy prices are already significantly higher in Europe than in North America, the decision protected European manufacturers who would have been at an even greater disadvantage to their counterparts in the United States and Canada had the measure been passed. However, there is concern that the European Parliament’s decision will give ammunition to critics of carbon trading systems in other parts of the world including Canada.

California Governor approves link of State's carbon market with Quebec

Last week, California Governor Jerry Brown approved the link of the state’s carbon market with Quebec. The next step is for California’s Air Resources Board to consider changes to its cap-and-trade program that will allow it to link with Quebec. The Board is scheduled to meet on April 19th. A spokesman has stated that the Board intends to continue to work on all necessary additional steps to ensure California’s efforts to link with Quebec are successful.

If approved by the Board, California and Quebec intend to implement the link between their carbon markets on January 1, 2014. Once linked, they will hold joint auctions of carbon emission allowances which can be used for compliance in either jurisdiction. In the interim, the two jurisdictions will test their auction platforms and trading systems for compatibility.

Both governments are hopeful that linking the carbon markets will improve liquidity for carbon allowances by increasing the pool of permits and companies trading them, as well as encourage expanded investments in low-carbon technologies.

Ontario to implement carbon reduction program

P. Jason Kroft and Andrew Sullivan -

Ontario’s Ministry of Environment (MOE) has released a discussion paper to support a dialogue on the elements of a potential Provincial greenhouse gas (GHG) reduction program (the Program). Greenhouse Gas Emissions Reductions in Ontario: A Discussion Paper (the Paper) considers, among other things, the following aspects of the Program: principles and goals for development; potential elements; scope; emissions reduction targets; certain compliance options; and public consultation.

Since 2009, the MOE has been collecting data on GHG emissions from large emitters. The Paper makes it clear that, moving forward, the MOE intends on implementing the Program with the intent to reduce GHG emissions. However, it is unclear, at this point, the exact form the Program will take. What is clear is that the public and stakeholders will be consulted with any further design of the Program.

Continue Reading...

California's inaugural cap-and-trade auction declared a success

Andrew Sullivan -

On November 14, 2012, the California Air Resources Board (ARB) held its first auction for the purchase and sale of carbon allowances for its nascent cap-and-trade regime. ARB chairwoman, Mary Nichols, declared the auction a success. For a number of reasons, there is good cause to agree with her. First, a tonne of carbon for the 2013 vintage year sold for $10.09. That’s slightly above the $10.00 price floor set by the ARB. The highest bid was a whopping $91.13. Second, there were three times the number of bidders at the auction than actual buyers, indicating a healthy and competitive market. Additionally, 97% of allowances were purchased by entities required to participate in the regime indicating prices were not influenced by speculative buyers. Rather, it seems to indicate regulated entities are looking to retire allowances in anticipation of compliance. Finally and most importantly, the auction sold out. All 23,126,110 2013 vintage year allowances were purchased, raising approximately $233 million. The kickoff of this auction creates the largest carbon market in North American and the second largest in the world, behind only the European Union Emissions Trading Scheme.

As we have noted on this blog before, California is acknowledged as a leader in climate change initiatives. Undoubtedly, Canadian environmental regulators will look to California’s cap and trade model with great interest. This is particularly true of Canadian provinces that are partners with California in the Western Climate Initiative (WCI): British Columbia, Manitoba, Ontario, and Quebec. The WCI is a partnership between California and the aforementioned provinces to implement a joint strategy to reduce greenhouse gases. The success or failure of California’s cap and trade scheme is likely to influence any Canadian WCI member’s willingness to adopt a similar scheme.

Australia and EU agree to integrate carbon trading scheme

Andrew Sullivan -

On August 28th, Australia and the European Union agreed to fully integrate their respective cap and trade schemes by 2018. Also, Australia has decided to drop its planned A$15 per tonne carbon credit floor price. The combined effect is that cheaper EU carbon credits will be available for Australian emitters. Under the integrated scheme, Australian business will be able to source 50% of their carbon liabilities from the EU, starting 2015. A similar allowance will be available for European emitters by 2018. 

This is a welcome announcement for the EU trading scheme. Problems with oversupply have driven the cost of carbon credits to record lows. Currently, EU carbon trades at around US$10 per tonne. Opening the market to Australian demand should alleviate this oversupply. With a carbon tax fixed at A$23 per tonne, Australian emitters are welcoming the integration which will offer them a cheaper alternative to the relatively high tax. However, the Australian government is standing by its projections that carbon prices will reach A$29 per tonne by 2015 and 2016. 

This formation of an international carbon trading bloc is of interest to other jurisdictions considering a carbon trading scheme, including Canada. If successful, it could serve as the model for other nascent international and regional cap and trade blocs, such as the Western Climate Initiative between California, BC, Manitoba, Ontario and Quebec.

California to run trial cap and trade auction

Andrew Sullivan-

On August 30th, the California Air Resources Board (the Board) is holding a trial auction for the purchase and sale of carbon permits in what will be North America’s first full-scale carbon market. This will give the Board and about 150 market participants an opportunity to become acquainted with the electronic trading platform before the first real auction, scheduled November 14.

California is acknowledged as a leader in climate change initiatives. Undoubtedly, Canadian environmental regulators will look to California’s cap and trade model with great interest. This is particularly true of Canadian provinces that are partners with California in the Western Climate Initiative (WCI): British Columbia, Manitoba, Ontario, and Quebec. The WCI is a partnership between California and the aforementioned provinces to implement a joint strategy to reduce greenhouse gases. The success or failure of California’s cap and trade scheme is likely to influence any Canadian WCI member’s willingness to adopt a similar scheme.

CRA denies tax deduction for Alberta Climate Change Fund Payments

Doug Richardson and Julie D’Avignon -

As emissions and cap-and-trade regimes develop, the tax issues relating to such regimes evolve and receive further consideration. One aspect of Alberta’s emission reduction regime is the Climate Change and Emissions Management Fund (the Fund). A greenhouse gas emitter that is subject to Alberta’s provincial emission reduction target may pay $15 per tonne into the Fund to the extent its emissions are in excess of the emissions target set by Alberta’s regime. The money collected by the Fund is intended to be invested into projects, initiatives and technologies relating to reducing emissions.

One of the tax issues relating to this type of regime is the nature of contributions to the Fund for tax purposes, and in particular whether the contributions are deductible for tax purposes. 

Continue Reading...

Alberta carbon capture and storage project cancelled

Lewis Smith -

Capital Power Corporation, Enbridge Inc. and TransAlta Corporation have decided to cancel Project Pioneer, a carbon capture and storage project that was proposed for Capital Power and TranAlta’s jointly-owned Keephills 3 coal-fired power plant located approximately 70 kilometers west of Edmonton, Alberta.

The project was intended to include: a carbon capture facility that would have removed CO2 from a portion of the Keephills 3 flue gas, a pipeline to transport CO2 to a sequestration site approximately 6 kilometers from the power plant, and a second pipeline to transport CO2 to an existing oil production facility in the Pembina oil field, approximately 75 kilometers from the plant. CO2 from the second pipeline, which would have carried the majority of the captured gas, was to have been used for enhanced oil recovery. Project Pioneer was intended to demonstrate the commercial scale-viability of carbon capture and storage technology.

Continue Reading...

Mexican Legislature passes robust climate change law

Kim Lawton and Annie Pyke -

New Legislation

On Thursday, April 19, 2012, Mexico's lower and upper houses passed a sweeping climate change bill clearing the way for President Felipe Calderon to sign it into law. President Calderon is expected to sign it in the coming days. After three years of debate and revisions, the bill has very strong legislative support and overwhelmingly passed Mexico’s lower and upper houses (Chamber of Deputies and Senate, respectively).

The Mexican legislation is one of the strongest national climate change laws passed to date. The bill mandates several changes:

  • requirements that future governments meet regular emissions reduction targets with the goal of ultimately cutting carbon emissions 30% below business-as-usual levels by 2020, and by 50% below 2000 levels by 2050;
  • substitution of renewable sources for 35% of all electricity sources by 2024;
  • requirement of mandatory emissions reporting;
  • establishment of a carbon-trading market; and
  • creation of a commission to oversee implementation of the bill.
Continue Reading...

Greater fines and new administrative penalties for environmental violations in Quebec since February 1st

Myriam Fortin -

The final measures provided under Bill 89, An Act to amend the Environment Quality Act in order to reinforce compliance came into force this February 1st, giving the Ministry of Sustainable Development, Environment and Parks (Ministry) greater powers against contraveners.

Fines may now reach one million dollars for natural persons and six million dollars for legal persons for a violation of the Environment Quality Act (EQA).

Continue Reading...

International round-up: climate change measures developing in 2012

Kim Lawton and Annie Pyke -

The past year was an eventful period in the area of emissions trading and climate change regulation and policy development and 2012 is showing no signs of slowing down. Globally, climate change measures are encountering both resistance and successes as the world’s nations struggle to control greenhouse gas (GHG) emissions.  This blog post contains a rundown of some key stories we see developing in the coming months and which we will monitor and describe from time to time in this blog.

Continue Reading...

New proposed amendments to the Quebec GHG reporting regulation

Myriam Fortin -

After the coming into force on December 30, 2010 of the Regulation amending the Regulation respecting mandatory reporting of certain emissions of contaminants into the atmosphere, a new draft regulation was published October 5, 2011 (English version / French version), proposing additional amendments intended to harmonize the regulation with requirements of the Western Climate Initiative (WCI), in order to allow a good functioning of the greenhouse gas (GHG) cap and trade system.

The draft regulation proposes emissions calculation methods for twelve industry sectors, being nickel and copper production, ferroalloy production, magnesium production, nitric acid production, phosphoric acid production, ammonia production, electricity transmission and distribution and use of equipment to produce electricity, carbonates use, glass production, mobile equipment, electronics manufacturing, and natural gas transmission and distribution.

Continue Reading...

Australian carbon tax plan expected to become law

Annie Pyke and Kim Lawton -

On this blog we will regularly provide you with information on Canadian and international developments in the regulation of carbon and the creation of carbon trading and taxing regimes. We will of course watch with great interest to see if federal Canadian and further provincial initiatives develop in such spheres but we may find that the international arena moves ahead more swiftly in the near term in meeting the climate change challenge. In this blog entry we briefly consider Australia's proposed carbon tax rules.

Australia’s carbon tax plan has cleared its biggest hurdle to date. Last Wednesday, Australia's House of Representatives (the lower house of parliament) voted 74 to 72 in favour of the regime which will bring about a carbon tax and carbon trading scheme. The bills must still pass the Senate (the upper house of parliament), in a vote set to take place in November, but apparently the government and Green senators have enough votes to ensure the bills will become law. The carbon tax and trading regime is a main component of the Australian government’s plan to cut carbon emissions by 5 percent of 2000 levels by 2020.

Continue Reading...

Emerging trends in global carbon finance

P. Jason Kroft and Cora Zeeman -

Recent developments in international carbon finance have seen investors and carbon intermediaries moving away from the global carbon market and towards local initiatives, such asregional carbon trading regimes, as a means of participating in carbon reduction financing or achieving climate change objectives. This short piece identifies and begins to examine this trend away from global carbon market development and towards regional initiatives and some of the reasons for this movement.

At the 1997 climate change conference in Kyoto, Japan, 193 nations, including the European Union (EU), arrived at a global consensus on using financial measures to combat climate change. The Kyoto plan introduced restrictions on greenhouse gas (GHG) emissions by industrialized countries and the creation of credits to emit GHGs that would be tradeable in a global carbon market. Developing countries, including China and India, were not given GHG emissions limits and could sell credits based on their own GHG emission reductions to industrialized nations. When the Kyoto commitments entered into force in 2005 and, as a result, became a binding international commitment, they were taken up in earnest by the EU and were made mandatory under the EU Emissions Trading Scheme (ETS). An emissions trading system has the advantage of allowing companies to choose the most cost-effective means to achieve GHG emission reduction targets by either purchasing allowances or decreasing emissions.

Continue Reading...

Election 2011: Canada's climate change future

P. Jason Kroft and Annie Pyke

With the federal election just a few days away, we thought it would be useful to our readers to identify what each major political party's published campaign platform says about climate change and Canada's role in curbing greenhouse gas (GHG) emissions. It is certainly fair to conclude that to the extent that there has been robust discussion of real substantive issues in this political campaign (a premise that is certainly not free from any doubt), the topics of climate change, cap and trade and implementation of international protocols to address GHG emissions (among other topics relating to the environment) have not been a focus of discourse for most of the major political parties. Whether climate change remains a topic that engages the voting public is an unanswered question for another day, but it is at least our proposition that most of the major political parties have not identified there to exist real political advantage to making the environment and climate change a major campaign focus. For present purposes, we are not questioning the sufficiency or merit of any plan, just letting you know what the plans are. Of course, we would like to hear from you as to you own views on these plans. 

Continue Reading...

San Francisco Judge rules against California Cap-and-Trade system

In a recent case decided in the Superior Court of California, Association of Irritated Residents vs. California Air Resources Board et al, a San Francisco County judge made a tentative ruling against the California Air Resources Board (CARB) ordering CARB to postpone the implementation of regulations to reduce greenhouse gas emissions, including the creation of a cap-and-trade system. The judge ruled that CARB failed to properly consider alternatives to a cap-and-trade system and that alternatives should have been presented to the public for comment. If the ruling is finalized, it could impact both future and existing greenhouse gas regulation in California. Pursuant to the rules governing court proceedings in California, both sides have 15 days from January 21, 2011, the date of judgement, to file objections to be considered by the Court prior to the issuance of the final order. For more information on the proposed California cap-and-trade program, please see our earlier blog post.

Carbon traders focusing on California

Following the recent abandonment of a national cap-and-trade system in the United States and the winding-down of the Chicago Climate Exchange voluntary carbon-trading program, traders and exchanges are now focusing their efforts on California. A recent Wall Street Journal article describes estimates of the potential size of California's carbon market ranging from $3 billion to $58 billion, which has exchange operators competing with each other to become the dominant trading hub. Many in the exchange industry view carbon allowances and related derivative products as a key long-term asset with global potential. California currently has several operators interested in launching exchanges, the first of which could begin trading operations as early as next year.

Chicago Climate Exchange to discontinue greenhouse gas cap-and-trade program

The Chicago Climate Exchange ("CCX") recently announced that they will discontinue the CCX emission reduction program at the conclusion of its Phase I and Phase II program at the end of this year.  Launched in 2003, the CCX emission reduction program was North America’s first voluntary greenhouse gas (“GHG”) cap-and-trade scheme. CCX Members made voluntary but legally binding commitments to reduce their annual GHG emissions by 6 per cent below their emissions baselines by the end of 2010.  Members who reduced emissions beyond their targets earned surplus allowances to sell, bank or trade with Members who did not meet their targets.

Carbon Financial Instrument (“CFI”) contracts were used to perform these trades.  The closing prices for a CFI contract fell to $0.05 in January 2010, from its all-time high of $7.40 in May 2008. Since February 2010, the CCX has had zero monthly trading volume.

In place of the emission reduction program, the CCX will create the CCX Offsets Registry Program, which will eliminate emission reduction targets in favour of a general marketplace for emission offsets.

"Fundamentally, with any program that relies on voluntary compliance for something not yet mandated into law, it makes it more difficult ultimately to have as vibrant a market as you'd want," said Bruce Braine, Vice-President of Strategic Policy at American Electric Power, one of the CCX’s founding Members.

Other CCX affiliate programs such as the European Climate Exchange and the Chicago Climate Futures Exchange will continue unchanged.

California Releases Proposed Cap-and-Trade Regulation

On October 28, 2010, the California Air Resource Board ("CARB") announced the release of its proposed greenhouse gas cap and trade regulation  as part of the state's commitment to the Western Climate Initiative ("WCI"). British Columbia, Ontario, Quebec and Manitoba plan to join California and several other states in the launch of the WCI cap and trade market in 2012.
A key part of CARB's AB 32 Scoping Plan, the cap-and-trade program provides an overall limit on the emissions from sources responsible for 85% of California's greenhouse gas emissions. The release begins a 45-day public comment period culminating in a December 16, 2010 public hearing at which CARB will consider adopting the proposed program.

British Columbia Releases Proposed Cap-and-Trade Regulations

On October 22nd, 2010, the government of British Columbia released draft cap and trade regulations for public consultation. The proposed regulations establish the rules for emissions trading and offset projects in the province and are part of the province's commitment to the Western Climate Initiative. The public consultation period is open until December 6, 2010.

British Columbia adopts new GHG emission limits - WCI Partners release details of cap-and-trade program

On July 27, British Columbia, along with four other Canadian provinces and seven U.S. states that are members of the Western Climate Initiative (WCI), released details of a proposed cap-and-trade program – set to begin in January 2012 – and other strategies designed to reduce regional greenhouse gas (GHG) emissions to 15% below 2005 levels by 2020, create green jobs and stimulate development of clean-energy technologies.

Fossil fuel production and other industrial sources account for approximately 35% of British Columbia’s annual GHG emissions, but unlike the carbon “consumption tax” imposed on businesses and individuals who use or purchase fossil fuels in the province, to date industry has not been subject to a GHG emission reduction program. With the introduction of the WCI program, any industrial operation emitting more than 25,000 tonnes of GHG per year will be subject to the proposed emission limits and penalties.

Among the WCI’s Canadian partners, British Columbia, Ontario and Quebec have implemented or are in the process of developing legislation that would enable cap-and-trade systems in those provinces.

See also: “B.C. adopts new limits for greenhouse-gas emissions with new ‘cap and trade’ system”

Carbon Capture and Storage - Identified challenges to implementation

Lanette Wilkinson

Carbon capture and storage (CCS) is interesting as a case study of a CO2 mitigation technology that maintains considerable political and fiscal support even though its long-term economic viability is dependent on high carbon prices and even though its implementation will in many cases require that U.S. states and Canadian provinces enact new legislation and regulations. This article considers the current legislative debate in the U.S. and examines the ways in which the absence of federal climate change legislation in the U.S. and Canada affects both the price of carbon and the implementation of carbon abatement technologies. It also identifies regulatory gaps that must be addressed before CCS can be widely implemented.

Continue Reading...

The taxation of tradable permits

Douglas Richardson and Julie D'Avignon

With the development of cap-and-trade regimes and the recent attention given to them in North America and abroad, the issues arising in this context have come under careful consideration by environmental and commercial lawyers for some time. However, the national and international tax consequences of trading in emission allowances (or tradable permits) have been largely ignored in the analysis and the political developments that have preceded the United Nations Conference on Climate Change in Copenhagen from December 7 - 18, 2009. The importance of these consequences should not be underestimated, since any tax regime that results in "tax friction" costs may impede the efficacy of a domestic cap-and-trade system and negate the natural flow of such instruments across international borders. These issues and others were recently identified and addressed in submissions made by the Business and Industry Advisory Council (BIAC) of the Organisation for Economic Co-operation and Development (OECD).

Continue Reading...

The EU Emissions Trading Scheme and the UK Climate Change Act: a UK Perspective

Jonathan Deverill

The European Union Emissions Trading Scheme (EU ETS), the largest emissions cap-and-trade scheme in the world, commenced on January 1, 2005. In addition, the United Kingdom's Climate Change Act 2008 has established the world's first legally binding emissions-reduction target, which requires at least an 80% reduction on 1990 emissions levels in the United Kingdom by 2050. The following article gives a brief overview of the EU ETS and of some of the steps being taken to reach the 80% reduction target under the Climate Change Act 2008.

The EU ETS, entered into under the provisions of the European Union (EU) Emissions Trading Directive, represents one of the steps taken by the EU to meet its greenhouse-gas-emissions reduction target under the Kyoto Protocol. In accordance with the Kyoto Protocol, the EU is aiming to attain an 8% reduction on 1990 emissions levels during the Protocol's first "commitment period" (2008-2012), while the UK itself is seeking to achieve a 12.5% reduction in that period. The EU ETS is being rolled out in phases, the first of which ran from 2005 to 2007 and the second of which is running from 2008 until 2012. In preparation for the third phase, commencing in 2013, the EU is reviewing the Emissions Trading Directive.

Continue Reading...

The impact of legislation requiring GHG-emissions reporting

Jason Streicher

Focus continues to intensify on this December's climate change talks in Copenhagen. Regardless of what may transpire by year's end, climate-change considerations will remain a hot-button issue and will garner long-term political, legal and media attention. Towards Copenhagen and beyond, it seems safe to say that Canadian companies will continue to be faced with new legislative requirements enacted to address climate change issues. As an example, many Canadian companies are, or soon will be, required to report greenhouse-gas (GHG) emissions.

Against this backdrop, Canadian companies should consider whether they are adequately preparing themselves to report GHG emissions and/or to comply with other foreseeable climate change obligations. Additionally, Canadian reporting issuers should address whether they are giving adequate disclosure to investors about environmental matters that may have a material impact on them.

Continue Reading...

VCS streamlines offset approval for Canadian projects

Ruth Elnekave

On July 23, 2009, the Voluntary Carbon Standard (VCS) Association announced that it will no longer require projects located in Canada to demonstrate that Voluntary Carbon Units (VCUs) issued to the project would cancel out a corresponding number of compliance units under the Kyoto Protocol, known as Assigned Amount Units (AAUs). This requirement eliminates the risk of double counting that occurs when a project in a particular country sells emission reductions and thus "frees up" AAUs that the government can then sell.

"The VCS Board concluded that this requirement is not applicable to Canada because there is no regulatory framework to implement the Kyoto Protocol, none is likely to emerge, and the country is unlikely to achieve its Kyoto Protocol reduction commitment," the VCS reported.

To date, Canadian projects have not been able to generate VCUs. The action is expected to enhance access to global carbon finance markets and provide incentives for the development of, and investment in, GHG reduction and removal projects in Canada.

The VCS is an internationally recognized standard for voluntary carbon offsets, providing a framework with additionality and baseline-setting requirements, as well as a registry system for buyers and sellers to track VCUs.

Ontario introduces cap-and-trade legislation

Ruth Elnekave

On May 27, 2009, the Government of Ontario introduced legislation to enable the creation of a "cap-and-trade" system in the province. If passed, Bill 185 - the full name of which is the Environmental Protection Amendment Act (Greenhouse Gas Emissions Trading), 2009 - would amend existing legislation to establish a system with hard caps on the absolute level of permitted emissions. This is expected to help the province meet its commitment to reduce greenhouse gas (GHG) emissions to 6% below 1990 levels by 2015 and 15% by 2020.

Continue Reading...

Carbon capture and storage: A key carbon abatement option in Canada?

Ruth Elnekave

As countries worldwide search for ways to make deep cuts in carbon dioxide (CO2) and other greenhouse gas (GHG) emissions, carbon capture and storage (CCS) technology is being recognized by governments, research institutions and industry as a potentially key tool for such emissions reduction.

The world's leading body of experts on climate change, the Intergovernmental Panel on Climate Change,1 believes that CCS is among the most promising tools to control GHG emissions. In Canada, with the recent re-election of Prime Minister Stephen Harper, the development of CCS is expected to proceed as planned as a cornerstone of the government's green plan.

Continue Reading...

Ontario and Quebec announce plans to create interprovincial cap and trade system

Amy Hu and Kirsten Iler

At a joint cabinet meeting held in Quebec City in early June, Ontario Premier Dalton McGuinty and Quebec Premier Jean Charest signed a Memorandum of Understanding with respect to a provincial and territorial cap and trade initiative. The accord sets out the two provinces' plans to create an interprovincial cap and trade system for the trading of emissions credits, which could be implemented as early as 2010.

The accord explicitly rejects the use of the intensity-based targets (i.e., per unit of production) such as those used in the federal government's green plan called Turning the Corner. Instead, like the Kyoto Protocol, the system proposed by the two Premiers would set caps based on absolute greenhouse gas reductions using a 1990 baseline.  The federal framework uses 2006 as its baseline year and, as noted, rejects hard caps on emissions in favour of intensity-based reduction targets.

Continue Reading...

Canada moves forward on domestic emissions trading market

Kirsten Iler and Ruth Elnekave

On March 10, 2008, the Government of Canada released much anticipated details of its Regulatory Framework for Industrial Greenhouse Gas Emissions, part of its Turning the Corner climate change plan first announced in April 2007. The framework document and accompanying policy documents (the Framework) set out mandatory intensity-based (i.e., per unit of production) reduction targets, details of certain compliance mechanisms, and new measures to address Canada's leading industrial greenhouse gas (GHG) emitting sectors: electricity and oil and gas. A significant aspect of the Government's announcement is its emphasis on carbon capture and storage (CCS) technology as a key solution to reduce emissions - not surprising in light of the $250 million for CCS announced in the Government's February Budget Plan.

Continue Reading...

Proposed launch date for trading of CO2e futures in Canada

Alix d'Anglejan-Chatillon and Jason Streicher

The Montreal Climate Exchange (MCeX) recently announced that, subject to regulatory approval, on May 30, 2008 it plans to launch trading of its first environmental product, namely futures contracts on Canada carbon dioxide equivalent (CO2e) units. The MCeX set the launch date after the federal government's March 10, 2008 release of further details of its greenhouse gas emissions regulations.

It is expected that the emissions reductions credits and offset credits under the federal government's proposed greenhouse gas regulatory scheme will be the two sources for futures contracts on Canada CO2e units. Units of each of these two types of domestic credits (which will represent an equivalent emission of one metric tonne of CO2e) will be the underlying interest of the CO2e futures contracts traded on the MCeX.

Continue Reading...

Canada's first national emissions trading system proposed

Larry Cobb, Glenn Zacher, and Kirsten Iler

After a history of false starts, in late April the federal government announced its new climate change plan, Turning the Corner, which among other things would establish Canada's first, national emissions trading system. The government's Regulatory Framework for Air Emissions document describes the proposed air emissions regulations, which are broad and cover greenhouse gas (GHG) emissions and other pollutants.

Among other features, the proposed regulations would set mandatory, intensity-based (i.e., per unit of production) GHG reduction targets for industrial emitters of 18% (relative to 2006 levels) by 2010. Targets would then rise by 2% per year to reach 26% by 2015. On the basis of these revised targets, Canada would not meet its obligations under the Kyoto Protocol of achieving an absolute reduction in GHGs of 6% by 2012, relative to 1990 levels.

Continue Reading...